Date: 25 November 2005
 
Speaker: Dalia Grybauskaite, European Commissioner for Financial Programming and the Budget
 
Little more than two weeks ahead of the crucial summit at which the European Heads of state and government are expected to reach an agreement on the next budget for the European Union, CEPS hosted a lunchtime meeting with Dalia Grybauskaitë, European Commissioner for Financial Programming and the Budget.
The Commissioner stressed first and foremost the urgency of the need to strike a deal. She explained that if this will not happen by December every successive month will have huge costs, especially in terms of losses for the new member states. Moreover, she pointed out that the lack of an agreement would actually have distorting consequences, as it would affect negatively the “modern” part of the budget (investment in Research and Development, structural funds, rural development), while the compulsory expenditures for agriculture and administration could still be implemented.
But the compromise was made all the more difficult by a debate which has since June been characterised by “a common tendency: a hard struggle for privileges and striving to receive more by contributing less”. This attitude was particularly unfair on the part of the EU 15, which are fighting to retain the same level of pre-enlargement funds, notwithstanding the fact that with the accession of the new member states they all have a much higher level of development compared to the new EU average.
The Commissioner highlighted that both of the main problems that will be on the table in December, i.e. the UK rebate and the reform of the structure of the budget, are of a political, rather than economic, nature. Grybauskaitë explained that enlargement would boost the UK rebate to 64%, and its growth would be bigger than the growth of the EU budget itself (for 27 member states). Without the rebate, the member states contributions would also by and large match their prosperity (measured by the GNI). On the second point, Grybauskaitë signalled the Commission willingness to devote more resources to “a new impetus in research, innovation and competitiveness”, and, in general, to devise a roadmap to modernise the EU budget.
In this context, the UK presidency is under mounting pressure to present a new proposal. However, such a proposal is not expected now before the 5th of December. The member states will therefore be left with limited time to assess it, which may create procedural problems to those governments that have to run the proposed deal through the national parliaments before they can approve it. This increases the risks of an agreement not being reached, which would in turn lead to two alternative scenarios. The “painful” one would be an agreement in March 2006, which would still allow for some long-term planning, even though the chances of launching implementation programmes in early 2007 would decrease drastically; while the “self-destructive” scenario would be a deal after March, which would jeopardize the budget for 2007 and, in the extreme could lead to the Parliament calling into question the current Interinstitutional Agreement on the budget, thereby causing a return to the pre-1988 system of annual programming. The Commissioner however concluded on a positive note, stating that she believes that a deal in December is still possible and calling for immediate action to that end on the part of the Presidency.
 
See the slides of the presentation by Commissioner Grybauskaite.